The trouble with that chart is that it’s inflation adjusted. Stock earnings are calculated on constant dollars.
Even so, SP earnings estimates I’ve seen range from $34 to $60. At $60, a 15 P/E is SP 900 and we’re at 971. At $34 a 15 P/E is SP 500. The market at these levels is factoring in not only a robust recovery but a boomlet. Where this type of economic growth is going to come from in an era where real estate is likely to be quite flat at best, never mind down, and GDP growth of 4-5% (current rosy projections) is a fall-on-the-floor-laughing bulltard fantasy, I and most stock traders I know are having a very, very hard time with valuations up here. Plus, the avalanche of mortgage lending and the cashflow into consumer hands resulting therefrom will NEVER return. So where this ebullient growth is supposed to come from escapes me, for now.
The alleged “good earnings” this current season are with very few exceptions due to massive layoffs, which means that alarmingly lowered revs are being measured against seriously reduced expenses. By that I mean, these companies have brutally reduced their head counts and as a result are NOT the same sized companies they were in terms of production. These are one-time adjustments which *appear* to be massive productivity bumps but are not sustainable.
Now, caveat-wise, I’ll acknowledge being generally bearish (it’s my nature) and I remain pessimistic about the mid-term (say 18 month) outlook. But maybe I’m grossly and stubbornly overthinking it. This last week has been quite remarkable; the market is already essentially 50% up off its’ 666 lows, and when you consider that virtually EVERY company issued secondaries in probably the largest era of issuance in history, amounting to (estimate 3-4% of the entire market) the market is not only ignoring immense qtys of bad news but 15-20% stock dilution in nearly every large cap as well! Yet it keeps rising, and personally I think it is because the dollar is now the world’s carry-trade sardine.
If that’s the case, the US standard of living will really deteriorate and you can say hello to Euro-style $6+ gasoline. But what’s important, as we all know, is that Goldman smokes their numbers and Mr. Buffett continues his sageness.
His health care program is a pack of lies put together by idiots. Congressional aides with the brain power of snails wrote that pile of shi'ite up. Or they just gave the lobbies for the drug companies, AMA, hospitals and HMOs a free hand.
Holy moly!